Established Players Outlive Newcomers as Middle East Market Consolidates

ExecuJet Aviation has been in the Middle East for the long haul since 1999 and since then it has seen the bizav market fluctuate from boom to flat and now reach a slow climb. It has seen rivals come and go, and ambitious business plans turn to dust.

“A lot of people saw this [the Middle East] as an easy entrance to the business and misunderstood what is needed to be sustainable,” ExecuJet Middle East managing director Mike Berry told AIN. “Then they saw the market contract and aircraft values contract and they realized that it was the wrong game for them to be in, because it’s not as easy as it seemed.”

Having seen some of its managed aircraft fleet depleted by the downturn, ExecuJet’s operation in Dubai has grown primarily from maintenance services. In addition to its long-established, factory-authorized cover for Bombardier, the Switzerland-based group now also supports Hawker Beechcraft and Embraer’s Legacy series. It now sees its charter fleet starting to grow as the pace of new aircraft deliveries in the region once again picks up, and is also seeing recovery in its handling business.

From Berry’s perspective, the United Arab Emirates is still the region’s bizav hub, along with the large Saudi market, but eagerly anticipated newcomers like Qatar have yet to develop as expected. He believes that the planned new airport in the Qatari capital Doha could improve the situation there–as should plans for a new FBO in Riyadh to match that already established in Jeddah.

Meanwhile, like other operators, ExecuJet is having to contend with a mounting capacity squeeze at Dubai International Airport as airline traffic continues to increase there in the face of uncertainty over the long-planned relocation to the delayed Al Maktoum International Airport.

Jet Aviation, too, has deep roots in the desert, with well-established operations in Dubai, Jeddah and Riyadh. These businesses are now in what Christof Spaeth, senior vice president for MRO and FBO services for Europe the Middle East, Africa and Asia, described “consolidation” while being still ahead of bizav service providers that are struggling or defunct.

Handling and maintenance activities also have boosted Jet Aviation, as more new aircraft arrive in the region. The company reported movements slightly up in Dubai of late, while Saudi Arabia has seen a dip of 10 percent, related in part, according to Spaeth, by political turbulence in the region.

This decline has had knock-on consequences for locations such as Geneva in Switzerland, which would otherwise be a popular destination for Saudi clients. Spaeth believes that Dubai has remained stronger due to its more diverse client base. That said, Jet Aviation has sought to move the center of gravity somewhat away from Dubai, with its recent decision to open at base in Abu Dhabi. Its decision to do this was in part motivated by a desire to have an alternative if the confused situation regarding the Dubai airports should worsen.

In Spaeth’s view, the Middle East market still has potential for some more consolidation. “It is a bit less wild then it was and a bit more professional,” he told AIN. “The market isn’t the gold mine that some thought it was, and it takes a certain level of service, making it hard for new players. Those with a strong brand, like us, still have a good position here and we keep getting approached to open more new locations.”

Jet Aviation has been selected as one of the three FBOs to be invited to operate at the new general aviation area at Riyadh. The construction work should be completed in 2013.

Home-field advantage in Abu Dhabi still is firmly in the hands of Royal Jet, where president and CEO Shane O’Hare says the firm is achieving 30-percent growth this year against the backdrop of a recovering market that dipped last year. Among the factors spurring growth, he reported, is reconstruction work in Iraq and Afghanistan.

The company has made its name as the world’s largest operator of Boeing Business Jets, with a six-strong fleet that is set to grow to eight in the next year or so. The mix also includes a pair of Gulfstream 300s, a GIV-SP, an Embraer Lineage and a Bombardier Learjet 60. Growth plans call for the fleet to increase to 20 models by 2015. Having earned 180-minute ETOPS clearance for the BBJs, Royal Jet has been flying much farther afield, including long hops to Pacific islands.

Royal Jet’s expansion plans are based on a two-pronged approach. It will seek to exploit opportunities for managing growing numbers of privately owned super-midize jets in the Middle East, while opting to pursue higher charter margins available from larger jets like its BBJs. According to O’Hare, some sectors of the charter market have become unsustainable due to cut-throat pricing and this has driven some operators out of the region, largely back to Europe.

Royal Jet has started to make progress in the Saudi Arabian market through its partnership with Arabasco. It expects to see business aviation spreading farther afield in the region based on improvements to airport infrastructure in countries such as Oman and Jordan.

Bahrain is another new frontier for Middle East business aviation and this is being probed by TAG Aviation, which last year established an air operator’s certificate there. Its new subsidiary currently operates a pair of Bombardier Challenger 605s on behalf of private owners, with one of these having logged more than 700 flight hours in less than 15 months in service.

According to Russ Allchorne, who manages TAG’s new Bahrain subsidiary, the company is making plans to offer management for aircraft in neighboring Saudi Arabia. The group is looking to recruit more pilots to increase its operational flexibility.

But what of the political violence that has harmed Bahrain’s reputation for stability and put it on the world map for all the wrong reasons?

“It hasn’t had much impact,” said Allchorne. “Our main concern was for the safety of our crew, but we didn’t see any trouble where we are based and we are not convinced that it won’t impact the business model now that it has receded.”